Publication details

Czech Republic

Authors

HODULÁK Vladan

Year of publication 2019
Type Chapter of a book
MU Faculty or unit

Faculty of Social Studies

Citation
Description The chapter analyses the relationship between the Czech Republic and the Euro. The Czech Republic promised to join the Eurozone upon its entry to the EU in 2004. The Czech economy has already met the Maastricht criteria on several occasions. However, there is still no definite date set for Euro adoption. The majority of the Czech public oppose the common currency, and this is reflected in the attitudes of Czech politicians. The Czech development strategy has so far rested on two main pillars – an undervalued currency and disproportionately low labor costs. Adopting the Euro means that the exchange rate channel for convergence would be abandoned and convergence would have to be facilitated by other means. There are few effects related to entry to the Eurozone that can be determined with any level of accuracy, and these are not very significant. On the other hand, there are some quite uncertain but potentially very significant consequences. Among the expected effects are lower transaction costs, higher wages, higher outflow of labor and higher inflation, all of which could generate serious economic imbalances. However, not joining the Eurozone would mean free riding on the system, with potentially very detrimental effects on the national interest of the Czech Republic.

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